Skip to content

CA Final · Financial Reporting · Ind AS 16 Property, Plant and Equipment

Veda Textiles Ltd holds the following tangible items at 31 March: (i) a weaving machine used in its own factory for several years; (ii) a stock of spare looms bought for resale to dealers; (iii) a generator used in the administrative office and expected to serve for eight years; (iv) a delivery van given on rent to a transporter for five years. Applying the definition of property, plant and equipment in Ind AS 16, which items qualify as PPE?

Items (i), (iii) and (iv) qualify. PPE are tangible items held for production or supply, rental to others or administrative purposes and expected to be used over more than one period. The spare looms are held for resale, so they are inventory and not PPE.

  1. AItems (i), (iii) and (iv) onlyCorrect
  2. BItems (i) and (iii) only
  3. CItems (i), (ii), (iii) and (iv)
  4. DItems (i) and (ii) only

Explanation

PPE are tangible items held for production or supply of goods or services, for rental to others, or for administrative purposes, and expected to be used during more than one period. Items (i), (iii) and (iv) meet both tests. Item (ii) is held for resale in the ordinary course, so it is inventory under Ind AS 2, not PPE. Excluding the rented van (option B) is wrong because rental to others is expressly covered.

Did you get it right without looking?

One question tells you little. A timed set on Ind AS 16 Property, Plant and Equipment shows your real accuracy, how long you take and where you lose marks.

Practise Ind AS 16 Property, Plant and EquipmentFree diagnostic mock

More Ind AS 16 Property, Plant and Equipment questions